Inter-sectoral cost comparisons: day care for the elderly

It is often argued that there are significant differences in the costs of providing public and non-public services. However, these arguments have almost invariably been based on crude comparisons of bald expenditure figures of rather dubious validity. In this paper we describe and apply a conceptual framework which attempts to place such inter-sectoral comparisons on a more reliable basis. Our application is to day care services for elderly people provided by local authority social services departments, area health authorities and voluntary organizations, although the framework has much wider relevance. Our results provide clear evidence to refute the oft-made assumption that voluntary services are universally cheaper than their statutory counterparts. Standardizing costs for the dependency characteristics of users and the activities of day units, we find that voluntary-statutory cost differences are dependent upon the scale of operation. Small voluntary units certainly enjoy a cost advantage, but larger voluntary units are unlikely to be cheaper, and are probably more expensive, than local authority units of a similar scale.